Restoring Respect for the Law in Canada-U.S. Commerce: The Regulatory Cooperation Council So Far

Sands, Christopher, Canada-United States Law Journal

If you have ten thousand regulations, you destroy all respect for the law.

--Winston Churchill

Anecdotes concerning ludicrous regulation are almost as common in democratic societies as complaints about taxes and poor public services. While the average voter accepts the need for regulation in principle, the proliferation of regulation in modern society has gradually reduced respect for the role of government in regulating economic activity. Particularly in the United States, concern over the size and cost of government has put pressure on regulators to focus on economic impacts, cost-benefit analyses, and competing claims about the public good. (1)

Regulation has particularly become a growing issue in international trade, with regulatory compliance in multiple jurisdictions adding to costs (and consumer prices), and occasionally limiting or prohibiting market access for certain products or personnel. (2) In 2011, the United States and Canada embarked on their latest effort in a series of negotiations aimed at limiting the negative impact of regulatory differences on bilateral trade and the economic competitiveness of firms operating in either country. (3) This paper looks at the context for these talks, their structure, and some of the challenges that will be faced.

PROTECTIONISM'S RESORT TO REGULATION

International trade was badly damaged by the wave of protectionism that coincided with (and exacerbated) the Great Depression. (4) The United States Congress adopted the Smoot-Hawley tariff in 1930, which raised tariff rates in the United States and prompted other countries to retaliate, (5) This essentially closed the United States to trade for several years following. (6) The passage of the Reciprocal Trade Agreements Act of 1934 not only rescinded the Smoot-Hawley tariff rates, but also limited American protectionist measures to just two relatively minor tools: anti-dumping duties (used when another country or a foreign company "dumps" products into the United States market at prices below the cost of production, just to gain a foothold in the market at the expense of other producers) and countervailing duties (a tariff applied provisionally to counter the effect of a foreign subsidy or unfair trade practice). (7) These two emergency trade measures were retained just in case foreign trade partners attempted to take advantage of the renewed openness of the United States. (8) This domestic reform was reinforced by the launch of international negotiations under the aegis of the General Agreement on Tariffs and Trade ("GATT") (9) in 1947 in an effort to promote international trade disarmament and further the global retreat from trade protectionism. (10)

Within the decade, anti-dumping and countervailing duties were sought by a growing number of American producers, and what had been marginal instruments of trade protection for "emergencies" became the mainstay of both American protectionism and protectionism abroad. (11) The lesson of this experience was that the motivations for protectionism are strong and firms will seek to use whatever means are available to gain an advantage (or to compensate for a disadvantage) in their domestic market.

As the GATT negotiations, the Canada-United States Free Trade Agreement ("CUFTA"), (12) and the North American Free Trade Agreement ("NAFTA") (13) lowered tariff barriers affecting trade between the United States and Canada, regulatory differences became more significant as obstacles to market access for companies in both countries. At the same time, regulations proliferated in both countries became more significant in shaping each domestic marketplace.

RISE OF THE REGULATORY STATE

Progressivism as a political movement gained adherents and influence in both the United States and Canada in the early part of the twentieth century. (14) Distinct from liberalism, progressivism advocated meritocracy and government by experts as a counterweight to corrupt patronage politics and electoral manipulation. …

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